Ethereum is one of the most useful blockchain projects globally. It is a second-generation platform that enables developers to launch products like those in the decentralized finance (DeFi), non-fungible tokens (NFTs), and gaming industries.
Indeed, some of the most popular products in the industry like Uniswap, Aave, and Compound are built on Ethereum. Ether, its native cryptocurrency, had a market cap of over $600 billion during its peak.
In this article, we will look at what Ethereum 2.0 is and how you can take advantage of the upcoming merge.
What is Ethereum 2.0?
Ethereum 2.0 is a major development that seeks to make the platform much better for both developers and users. The goal is to transition it from a proof-of-work platform to a proof-of-stake network. For starters, PoW blockchains like Bitcoin, Ethereum, Kadena, and Ravencoin depend on mining equipment to confirm new coins. This process is usually significantly slow and expensive.
On the other hand, proof-of-stake is a process that relies on validators to verify new blocks. It has been used widely by many blockchains like Avalanche, Cronos, and Cardano. These platforms are usually significantly faster and have low transaction costs.
For example, an average transaction in Ethereum costs more than $10. Proof-of-stake networks can handle transactions at less than $0.01. At the same time, while Ethereum handles less than 30 transactions per second, most PoS platforms can handle as many as 100k transactions in the same period.
Therefore, Ethereum 2.0 is a major undertaking that will have an impact on the entire Ethereum ecosystem. By being a PoS platform, developers will also not need to use layer 2 side chains like Polygon, Optimism, and Loopring that supercharge the current version of Ethereum.
What is merge and when is it happening?
Ethereum merge is a process that is part of the Ethereum 2.0 program. It is a process where the existing Ethereum mainnet will combine with the Beacon Chain. Beacon Chain is a PoS platform that will act as the consensus layer in the ecosystem.
Beacon chain introduced numerous features. For example, it supercharged speeds to thousands. And most importantly, since it is a proof-of-stake network, it introduced the concept of staking. Staking is a process where people earn interest by holding their ETH tokens. This interest comes from the total transaction fees that the Beacon chain charges.
The merge is expected to take place in September 2022. It has seen several delays in the past few months because of how delicate the process is.
What to expect from the merge
Therefore, when the merge happens, it will completely transition Ethereum into a proof-of-stake platform. After that, all future upgrades such as sharding will take place in it. Sharding is a process where blocks are divided into small pieces known as shards in order to accelerate its performance.
Most importantly, developers hope that the merge will lead to more ecosystem growth because of the historical significance of Ethereum. As such, instead of using smaller blockchains like Cronos, developers will have an incentive to use a legacy brand like Ethereum.
How to take advantage of the merge
There are several strategies to take advantage of the merge. Some of these approaches are:
Buy and hold
First, you can buy and hold Ethereum towards the merge event. Historically, cryptocurrencies like Ethereum tend to do well before a major event. This explains why the coin has jumped by more than 50% from its lowest level this year. You can buy ETH in leading exchanges like Coinbase and Binance and in online wallets like Skrill and PayPal.
Staking ETH 2.0
Another option is to stake ETH 2.0. This is a process where you buy ETH 2.0 and delegate it to validators in the Beacon chain. By doing so, you will be earning interest every month.
According to Staking Rewards, investors have staked ETH 2.0 worth over $22 billion, with holders earning an APY of over 4%. It has over 400k validators. The benefit of staking is that there is no minimum deposit, meaning any person can start earning within a few minutes. Some of the top exchanges for staking ETH 2.0 are Coinbase, Kraken, Binance, and Gemini.
Trading
Another strategy to take advantage of the upcoming merge is trading. Trading is the process where you take advantage of short-term fluctuations of Ethereum prices. The goal is to open a trade and close it within a few minutes. With ETH 2.0 nearing, the coin will have some significant volatility, which is an ideal condition for trading.
Conclusion
Ethereum is a major blockchain project that has simplified how developers launch their products. In this article, we have focused on the ongoing transition from a proof-of-work to a proof-of-stake network. Most importantly, we have highlighted the benefit of the transition and how it will dramatically change the entire blockchain industry. Finally, we have explained how buying and holding, and staking can help you take advantage of the transition.
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